Co-operatives and Community Benefit Societies Bill

House of Commons, 4 April 2003.

Clause 2 — Status of Charitable Societies to Appear on Correspondence etc

Mark Todd (Labour, South Derbyshire)

I beg to move amendment No. 1, in page 3, line 17, leave out 'and'.

Alan Haselhurst (Deputy Speaker, Saffron Walden)

With this it will be convenient to consider amendments Nos. 2 to 4 and 6.

Mark Todd (Labour, South Derbyshire)

It is a pleasure to bring the Bill back to the Floor of the House. It received considerable scrutiny and amendment in Committee, but there have been opportunities to reflect on further issues raised in Committee and outside, which form the basis of the amendments that we shall consider today.

Amendments Nos. 1, 2, 3, 4 and 6 deal with conveyances that were not included in the compass of the Bill. The intention is to ensure that the Bill properly covers important agreements between societies and their business partners. The amendments also deal with the protection of conveyances that charities, which may be co-operatives or community benefit societies, seek to agree. These straightforward amendments should be uncontroversial, based on our experience of debating the Bill so far.

Stephen O'Brien (Conservative, Eddisbury)

I simply wish to confirm that, in the overall context of the Bill and the debates on it that have taken place so far, I have no objection whatever to the amendment. It seems wholly practical.

Ruth Kelly (Labour, Bolton West)

Clauses 2 and 3 change the powers and capacities of the societies to facilitate their ability to enter into business transactions. However, there are also exemptions to some of those provisions for societies that are charities. The rationale is to ensure that the charities' assets are protected and not used for a purpose for which they are not intended. That is in line with the corresponding provisions that already exist for companies that are charities.

Clause 2 deals with part of the system of protection for charities. It requires societies that are charities to make their charitable status clear in various documents, including business letters and official publications of the societies. The aim of amendments Nos. 1, 2, 3, 4 and 6 is to provide greater conformity with company law by listing conveyances as other documents where the charitable status of the society must be disclosed. Those amendments also provide for the offences that will be committed where societies or their officers do not comply. Again, that is consistent with company law.

Conveyances could involve societies in significant transactions. It is therefore important that societies that are charities disclose their status. The Bill will then afford charities that comply with that disclosure requirement greater protection for their assets, in the event that conveyances are outside the rules or powers of the societies.

Andrew Love (Labour/Co-operative, Edmonton)

Can my hon. Friend confirm whether the changes that she talks about will create the level playing field between industrial and provident societies and companies that is so important for future competition in that sector?

Ruth Kelly (Labour, Bolton West)

I am very happy to confirm that that is the intention. These amendments should do exactly as my hon. Friend suggests: provide a level playing between industrial and provident societies and companies.

Gareth Thomas (Labour, Harrow West)

Is that absolutely necessary? Although I have argued that many changes in line with companies should be made for industrial and provident societies, may I ask my hon. Friend to give an example of why these amendments are as important as she and my hon. Friend the Member for South Derbyshire (Mr. Todd) suggest?

Ruth Kelly (Labour, Bolton West)

Yes, it is important that the playing field is completely level wherever possible. I have already given the example that conveyances should be listed as documents where the charitable status of societies must be disclosed. That is the purpose of these amendments in relation to industrial and provident societies.

Tom Levitt (Labour, High Peak)

As chairman of the all-party group on charities and the voluntary sector, I take a great interest in the proposals. Can my hon. Friend confirm whether the Bill and these amendments are in line with the Treasury's recommendations on charity law reform generally?

Ruth Kelly (Labour, Bolton West)

I can confirm that the amendment's intention is to bring industrial and provident societies up to date with the current state of company law, thus providing a level playing field. On those grounds, I commend the amendment to the House.

Amendment agreed to.

Amendments made: No. 2, in page 3, line 18, at end insert

'and

(e) in all conveyances purporting to be executed by or on behalf of the society.'.

No. 3, in page 3, line 32, leave out second 'or'.

No. 4, in page 3, line 35, at end insert

'or

(c) executes or authorises to be executed on behalf of the society any document such as is mentioned in subsection (1)(e) of this section,'.—[Mr. Todd.]

Mark Todd (Labour, South Derbyshire)

I beg to move amendment No. 5, in page 4, line 7, at end insert—

'(c) in relation to a society whose registered office is situated in one of the Channel Islands, means a society established for charitable purposes only ("charitable purposes" having the meaning given by the law of the Island in question).'.

Alan Haselhurst (Deputy Speaker, Saffron Walden)

With this it will be convenient to discuss amendment No. 8.

Mark Todd (Labour, South Derbyshire)

These amendments relate to the possibility that a society may be active in the Channel Islands. While the legislation does not relate to the Channel Islands or apply to them, it is not particularly uncommon for societies to trade there and, in some instances, be based there. During the Bill's progress, consultations have taken place with the Channel Islands authorities to ensure that they believe that appropriate provisions are included in the Bill, and they do. The principle behind the clauses amended by the amendments is, as has been said earlier, to provide societies with a level playing field so that they may trade on the same basis and with the same freedoms as equivalent companies. Obviously, there are other matters to consider which have arisen in debate in the House and in Committee, and I am sure that they will come up again on Third Reading, but we are now considering a specific aspect of the Bill. As I have said, the amendments have the support of the Channel Islands authorities.

David Lepper (Labour/Co-operative, Brighton, Pavilion)

I appreciate that my hon. Friend's amendments relate to the Channel Islands but, not having served in Committee, I should be grateful if he would tell me whether, in previous discussions, any thought has been given to the possibility that businesses in other parts of the world might operate in ways that weaken the protection that businesses in this country would otherwise enjoy? That may be outside the scope of my hon. Friend's Bill, but has any thought been given to it?

Mark Todd (Labour, South Derbyshire)

I thank my hon. Friend for his slightly cryptic intervention, in which he hinted at practices in other parts of the world that may be covered by the Bill. We cannot legislate for other parts of the world, and where societies choose to carry on activities in other parts of the world, those activities are bound by the laws of those countries. The amendments relate only to societies based in the Channel Islands. Some societies carry on business through agencies in the Channel Islands but, because the Bill does not constitute law within the islands, it does not relate to that.

Andrew Love (Labour/Co-operative, Edmonton)

Concern has been expressed in the past about the special status of the Channel Islands, and the Treasury has taken great interest in the development of financial services law there. I am thinking in particular of limited liability partnerships. Will my hon. Friend confirm that changes relating to the Channel Islands will not weaken in any way the solid foundations of his Bill?

Mark Todd (Labour, South Derbyshire)

I can confirm that the amendments do not alter in any sense the thrust of the Bill. They apply purely to the Channel Islands authorities, with whom we are in partnership but who, as my hon. Friend correctly states, are in a slightly anomalous legal position. I very much hope that the House supports the amendments.

Tom Levitt (Labour, High Peak)

I am intrigued by the suggestion in the amendments that the definition of charitable purposes may differ from one Channel Island to another. Is that the case, and is there not something to be said for encouraging the Channel Islands to have a common definition?

Mark Todd (Labour, South Derbyshire)

I am afraid that I am a sad soul who is not an expert on charitable activity on individual Channel Islands, and would certainly not seek to comment on how it may differ in different islands. However, presumably that matter was given careful thought by the Channel Islands authorities when they decided to support the amendments. I hope that the House, too, will support the amendments.

Stephen O'Brien (Conservative, Eddisbury)

It may be uninteresting but helpful none the less to start with the point made in the intervention by the hon. Member for High Peak (Mr. Levitt). If I recall correctly from my dim and distant days of studying law at the same Cambridge college as the Bill's promoter, the definition in the English legal system of the Channel Islands includes such places as Sark. It is possible that there are different charitable purposes on Sark, as it has no motorised vehicular traffic, so it may need a different definition to ensure that that is excluded. I do not know that for a fact, but it might be helpful in showing that there may be a difference. I daresay that the hon. Member for South Derbyshire (Mr. Todd) has thought the matter through, as have the Channel Islands authorities.

Tom Levitt (Labour, High Peak)

The hon. Gentleman will be aware that the Government strategy unit has proposed changes to charity law including a 10-point definition of charitable purposes—I may catch your eye later, Mr. Deputy Speaker, to talk about that. I hesitate to get the hon. Gentleman to suggest again what the Channel Islands should be doing, but the process that we are carrying out on the recommendation of the strategy unit to achieve a consistent approach to charities would help to clear up any anomaly.

Stephen O'Brien (Conservative, Eddisbury)

The hon. Gentleman makes an important point about the consistency of definition in the operation of the legislation. In moving amendment No. 5, the hon. Member for South Derbyshire said that the applicability of the Bill to the Channel Islands is not the issue, but it has to make reference to them in the case of societies that are registered there or have them as their place of business. The hon. Member for High Peak made an important point about the need in framing any legislation to seek a level playing field and consistency of approach. During proceedings on the Bill, there has been a debate about whether the Bill pre-empts the report from the strategy unit, formerly the performance and innovation unit, about charities and the voluntary sector. The Minister has consistently assured us that it does not, but it has focused thinking about the report.

I was much taken with the point made by the hon. Member for Brighton, Pavilion (Mr. Lepper), who asked about territories beyond the Channel Islands. The Bill's promoter rightly suggested that his hon. Friend was a touch cryptic in seeking to stay in order, but I felt that he may have been trying to explore Delphic territory. Delphi, of course, is a long way from the Channel Islands, so I am not sure that any assistance has been given.

The amendment is important because of the way in which such entities are often based and configured. Can the Minister give an assurance that not only in the strategy unit's work, but in the company law reform work that we expect to come forward in the next Session or shortly thereafter, a consistent approach will be taken to industrial and provident societies, as well as to those that we prefer to call co-operatives and community benefit societies? One aspect of the process that the amendment highlights is that it is not always necessary to have different legislation for those entities, given that we are bringing them into conformity with the broader law as it applies to corporate entities. If we can avoid societies being encompassed by separate statutes, and instead bring them into the body of company law, that would obviously be better. Clearly, the Minister and her advisers will give that careful consideration.

On that basis, I am happy to support the amendment, but it would be helpful to have the assurance that there will be a consistent approach across all corporate entities at a later date.

Richard Allan (Liberal Democrat, Sheffield, Hallam)

The promoter knows that the broad thrust of the Bill has all-party support. It is sensible for the provisions to encompass societies registered in the Channel Islands. Clause 2 deals with duties that will be imposed on charities, so it is important that the definition of bodies included in that broad remit is correct. It is clear which bodies are covered by England and Wales law and Scottish law, but there may be some uncertainty about those registered in the Channel Islands because, as the hon. Member for High Peak (Mr. Levitt) pointed out, the provisions will apply to all the bodies defined as charitable under the Acts of the various islands. That is a broader remit, and I hope the Minister will assure us that we can take it on trust that the bodies that we wish to catch within the Bill's net will be broadly similar, under the various laws of the Channel Islands, to those that would be caught by English and Welsh law and Scottish law.

What is the position of societies registered in the Isle of Man? Are those covered by the Bill or by other English and Welsh law, or do they remain outside the scope of the Bill, although we have brought in England, Wales, Scotland and now, with the amendments, the Channel Islands? How widely is the net cast?

Ruth Kelly (Labour, Bolton West)

As I outlined earlier, clauses 2 and 3 seek to make changes to the powers and capacities of societies to facilitate their ability to enter into business transactions. However, there are also exemptions from some of these provisions for societies that are charities. The rationale for that is to make sure that charities' assets are protected and are not used for a purpose for which they were not intended. That is in line with the corresponding provisions that already exist for companies that are charities.

To apply these provisions, we obviously need to define a charity. The Bill, as amended in Committee, already does so for societies registered in England and Wales, or Scotland. Although the Bill does not apply directly to the Channel Islands, we still need to make provision for societies based there that undertake business subject to the law of England and Wales, or Scotland. Following consultation with the Channel Islands authorities, I believe the amendment makes the necessary provisions. I am happy to reassure hon. Gentlemen who raised that point today. I therefore support the amendment.

The Industrial and Provident Societies Act 1965 does not apply to the Isle of Man, but it does apply to the Channel Islands, so they are in slightly different categories. That is why the Bill needs to cover the Channel Islands industrial and provident societies that are charities, but not those registered on the Isle of Man.

Tom Levitt (Labour, High Peak)

I am sorry to keep going on about the matter, but is my hon. Friend saying that it is possible for two charitable companies operating in mainland Britain, in the same environment, carrying out the same functions, one of which is registered in Britain and one of which is registered in the Channel Islands, to operate to two different legal definitions of charitable functions?

Ruth Kelly (Labour, Bolton West)

I assure my hon. Friend that that is the case, which is why we have had to define a charity for the purposes of the Bill.

On the point raised by the hon. Member for Eddisbury (Mr. O'Brien) about keeping industrial and provident society legislation up to date with company law, it is important to recognise that industrial and provident societies are not companies. However, we are keen to ensure that industrial and provident societies enjoy any new operational flexibilities that are introduced for companies.

Andrew Love (Labour/Co-operative, Edmonton)

As an adaptation of my earlier question, can my hon. Friend assure the House that there will be a level playing field between charities formed in the Channel Islands and those formed in other parts of the United Kingdom, so that there will be no attraction for some organisations to form themselves in the Channel Islands, rather than in the rest of the United Kingdom?

Ruth Kelly (Labour, Bolton West)

I shall deal first with the comments of the hon. Member for Eddisbury, and then return to my hon. Friend's question. We are keen to ensure that industrial and provident societies enjoy the same flexibilities as those that we grant companies in due course. The review of company law being carried out by the Department of Trade and Industry will give the Treasury the opportunity to consider updating a substantial proportion of industrial and provident society legislation through the powers given to us by my hon. Friend the Member for Harrow, West (Mr. Thomas) in his private Member's Bill. Although we cannot start the updating process until company law has changed, we will start thinking about how to modernise industrial and provident society legislation in advance. When we respond fully to the strategy unit's report, we will also bear in mind those areas of industrial and provident society legislation that we consider ripe for reform.

Gareth Thomas (Labour, Harrow West)

I was slightly concerned by my hon. Friend's comment to the hon. Member for Eddisbury (Mr. O'Brien) that any future changes to company law would need to be read across for industrial and provident societies. Although I welcome that, I hope she will acknowledge that in many respects company law has already been modernised far ahead of the law for industrial and provident societies. I am thinking particularly of audit and accounting exemptions, which leave industrial and provident societies substantially disadvantaged and having to incur considerable additional costs, in comparison with companies. Can she reassure me that that has not been overlooked?

Ruth Kelly (Labour, Bolton West)

As my hon. Friend knows, because he has raised these issues on many occasions with me and with the Treasury in various contexts, we are aware of the nature of that disadvantage and will give it due consideration when we consider our priority areas for reform. Of course, my hon. Friend will have to wait for a little while yet until we make those priorities clear, but I am sure he has the necessary patience.

The point made by my hon. Friend the Member for Edmonton (Mr. Love) about a level playing field for charities is indeed outside the scope of the Bill, which is purely about the differences between companies and industrial and provident societies. However, he makes a good point, and there will be a separate strategy and review of charities, which will consider changes to charity law in due course. I am sure that that review will consider the issue that my hon. Friend highlights.

Having fully considered the amendment proposed by my hon. Friend the Member for South Derbyshire (Mr. Todd), the promoter of the Bill, I am content that the amendment makes the necessary provisions. The Channel Islands authorities support the amendment and I can, therefore, recommend it to the House.

Amendment agreed to.

Amendment made: No. 6, in page 4, line 7, at end insert—

'(8) In this section "conveyance" means any document for the creation, transfer, variation or extinction of an interest in land.

(9) In subsection (5)(c) of this section the references to execution include—

(a) purported execution; and

(b) the doing of any act which (though not by itself execution) combined with other acts constitutes execution or purported execution.'.—[Mr. Todd.]

Clause 3 — Capacity of Society and Power of Committee to Bind it

Mark Todd (Labour, South Derbyshire)

I beg to move amendment No. 7, in page 4, line 36, after 'which' insert—

'not less than 21 days'.

The amendment is perhaps of slightly more substance than the previous ones, although I have been interested in the interventions made and interest shown with regard to the first two groups. I think that this amendment merits a little more thought.

Tom Levitt (Labour, High Peak)

Thank you very much.

Mark Todd (Labour, South Derbyshire)

I shall be interested to hear my hon. Friend's contributions on this matter as well.

The amendment deals with the protection of a contract or business deal between a society and a third party and the need to ensure that the actions of that society where it exceeds its constitutional objects do not prevent the contract from being legal and of substance. It relates to what should be done with regard to the consequences of such an event. If a society proves to be trading outside its rules, the object of the provisions is to protect the partner or customer in the contract. However, there is also a consequence for the society, which has to work out what to do about the fact that the objects set down in its constitution have been exceeded by the actions of its officers or a committee. The steps set out in the clause represent the belief that it should be possible for a society retrospectively to agree that those acting on its behalf have done so correctly.

The amendment sets out a notice period for a meeting at which such a decision might be made. The clause already gives a statement of the majority that must be achieved at such a meeting to secure that decision, but I think that it is perfectly legitimate that proper notice should be given for such a meeting, which will involve what may obviously be a very substantial decision for a society, as it is perfectly possible that the breach of objects is substantial and relates not only to a technical matter.

Adrian Bailey (Labour/Co-operative, West Bromwich West)

I thank my hon. Friend for giving way. I am interested to know what deliberations he had with regard to the 21-day period. I can see the logic of having no fewer than 21 days' notice, but the amendment does not seem to contain a further requirement to hold the meeting within a given period. On what basis did he deal with only half the timing equation?

Mark Todd (Labour, South Derbyshire)

That is a very reasonable intervention. The answer is that the 21-day requirement is based on equivalent company law. However, that may not be an entirely adequate answer, as societies are obviously rather different institutions from companies, and simply saying that we want to proceed on the same basis as that which applies to companies might be seen as inadequate. I think that 21 days' notice gives those who are concerned about the breach of an object of a society the opportunity to gather their arguments and inform members. As I said, the matter at stake may be of some substance in the society, so some individuals might wish to lobby people to vote against the resolution.

Perhaps it is worth setting out the consequences of not passing such a resolution. In those circumstances, a liability will remain among those who have made the contract—and rightly so. We should not permit circumstances in which the servants or a committee of the society can make a business deal that is clearly outwith the objects of the society, regardless of the democratic intent of its members. The provision is therefore a serious restraint.

Andrew Love (Labour/Co-operative, Edmonton)

The argument that, because company law provides for a 21-day period, it is appropriate in respect of industrial and provident society law is not a strong one, considering that one or two shareholders will often own 75 per cent. of the voting rights in a company. In industrial and provident societies, a much wider group of people would be involved. My question relates to the provisions in a special resolution. There are protections, including the 75 per cent. vote, so one has to question whether it is necessary to specify 21 days as a special length of time and whether seven or 14 days would be more appropriate, especially where it may be necessary to pass a resolution to preclude legal action.

Alan Haselhurst (Deputy Speaker, Saffron Walden)

Order. I think that, even on a Friday, I would like to observe the distinction between an intervention and a speech.

Mark Todd (Labour, South Derbyshire)

Thank you, Mr. Deputy Speaker. Nevertheless, I thank my hon. Friend for his contribution on the amendment, whether it was an intervention or a speech.

First, the wording ensures that the period should be at least 21 days. I recognise that my hon. Friends's examples involved shorter periods, but there is no reason why a society should not say that it will hold the meeting in 28 days' time or after a longer period, bearing in mind the initial point that he made, which was extremely sound. Indeed, that is why I said that my reference to mirroring company law was perhaps an inadequate answer. The institutions are very different and there are strong arguments for giving a decent interval. Before he intervened, I was setting out the sort of interval in which a genuine debate could take place about the implications of the decision. It is perfectly possible that substantial numbers of society members will profoundly disagree with a decision and wish to hold their officers and the committee instructing them answerable for that decision. This should not be some token paper process.

It is important to reflect on whether the proposed approach is the right one. My hon. Friend referred to an example that, I would argue, set aside some of the democratic constraints under which a society should operate. If there were a requirement that the meeting should be held within seven days, those who would be concerned about the decision might well have very little opportunity to gather their arguments and inform their colleagues about the implications. The point is that the provision happens to be the same as that which applies in company law, but I certainly believe that any society should take the view that at least 21 days means just that. There may be circumstances in which a matter is of such substance that longer notice and greater information flow is required among members to ensure that they are properly informed about the implications of the decision that has been taken.

Adrian Bailey (Labour/Co-operative, West Bromwich West)

I understand the logic of my hon. Friend's argument, but I am not sure whether he has addressed my concern. A society with a very long-standing membership could, for example, use the validation of that membership as an excuse for delaying a vote for a very long time. That would mean that the society had been operating outside its original terms of reference. What are his thoughts on that particular issue?

Mark Todd (Labour, South Derbyshire)

I thank my hon. Friend for his intervention. Such a lengthy delay would have two important implications. The first is a positive one that relates to the content of the Bill: the third party that engaged innocently in a contract with the society is protected, whatever the delay. That is an important issue to grasp. Where a contract has been struck with a third party by a society acting outside its objects, that individual or business will be protected because they acted unknowingly of the breach of the objects. As was mentioned on Second Reading, no such protection previously existed and such parties simply had to consult the constitution of the society themselves to be sure that the contract lay within the bounds of its objects.

The implications of lengthy delay within the society take me back to one of the Bill's foundations. Societies are democratic bodies, which is one of the reasons why they interest me, and presumably one of the reasons why hon. Members have been concerned and interested during the Bill's passage. They are interested in the fact that societies are the means of carrying out activities based on democratic will. A society might take the view that lengthy delay was required while the membership database was cleaned up to ensure that the correct people were notified of a meeting, although I cannot recall a circumstance in which such a decision was taken in my experience of societies. Most societies of which I know readily concede the inadequacy of their membership databases and recognise that it is inadequate to rely entirely on postal notices to inform people of a meeting of such substance. Members regularly do not notify societies of their changes of address, so the membership database would not be a full tool with which to notify people of a meeting. A retail society would achieve proper notification by placing notices in shops and places connected with the society's trading activities and by publicising the meeting in the relevant local media. I do not anticipate that my hon. Friend's argument about the quality of membership databases would be used to delay the process.

Most societies' constitutions—or at least those of all the societies that I have encountered—allow members who are worried about a matter to call a meeting about it. If there were evidence that a retail society's board had prevaricated about the process and delayed calling a meeting to discuss such an important matter, its members could, and should, take the opportunity to call a meeting.

Gareth Thomas (Labour, Harrow West)

The importance of general meetings for industrial and provident societies means, as my hon. Friend knows, that there is much reference to such meetings in current legislation on such societies. However, there is no requirement for 21 days' notice to be given before the meetings. Will my hon. Friend and the Minister reflect on why a 21-day notice period is so important for a general meeting to consider some issues, but not others?

Mark Todd (Labour, South Derbyshire)

It is the same notice period as that under company law to cover similar circumstances, although I qualify that by saying that it is not an overpowering argument. If a company trades outside its objectives, there is an opportunity for retrospective correction of that position, and the notice period is applicable to that. Nevertheless, it is reasonable to ensure that a proper notice period exists for a process of such substance. One could argue that a society's ordinary general meeting should be governed by the society's rules. The governance of a society is a combination of this country's law and the society's democratic will because it sets many of its own rules. The precise process of how general meetings may be legitimately called is a combination of the society's legal obligations and its democratic decision on how to conduct its business. I have never argued that the law of this land should cover every possible aspect of how a society or company should conduct its affairs. The law should adopt a relatively light touch.

I would argue against my hon. Friend if he were suggesting that time limits should be written into law to cover other aspects of societies' operations because they should usually be left to make their own decisions. However, the provision covers an important legal obligation because individuals could face legal action if they fail to comply with their society's objectives, as was suggested previously. A time limit in such circumstances is important for individuals' protection and, especially, societies' protection. The amendment is important and I am glad that it was thought of after Committee.

David Lepper (Labour/Co-operative, Brighton, Pavilion)

I fully appreciate my hon. Friend's points about a light touch and his wish to avoid over-regulating essentially democratic organisations in which decisions are taken by members. However, he earlier referred to ways in which the notification of the meeting might be given to members, such as by post or through advertisements. Did my hon. Friend consider whether there was any need to add such requirements to the way in which notice is given in the Bill, or does he think that that is already covered by existing guidance and legislation?

Mark Todd (Labour, South Derbyshire)

My hon. Friend's point relates to two arguments. First, such societies are extremely diverse. I have given examples of retail societies because my personal experience is based on them, but there are many other co-operatives and community benefit societies that are organised in wholly different ways. A prescriptive approach to provide that a general meeting must be called in a specific way and publicised through a specific medium would be an unrealistic legal intervention that disregarded the different ways in which societies operate.

Secondly, as I have already said, such prescription would interfere with a society's democratic right to make its own judgments. When the House considers this and other matters, we should weigh carefully the balance between the legal protections for people on which we should insist and freedom for our citizens to carry on their affairs as they wish, whether as individuals or when they act collectively in the way in which we are discussing.

Claire Ward (Labour, Watford)

I understand my hon. Friend's belief that we must balance regulation and criteria for sending notices. Does he agree that even if it is possible to have a 21-day notice period, the way in which the notices are sent out is equally important? If the majority of members could not access the notices, whether they were in the press or otherwise, the value of the 21-day notice period would be diminished.

Mark Todd (Labour, South Derbyshire)

It is a valid point that societies could choose to implement the obligations in the clause, including the notice period for which the amendment would provide, in a nugatory way. They could conduct a token process of informing people whereby members had no genuine opportunity to find out about a decision to call a meeting or, therefore, to participate in it.

However, the activities of those organisations and the democratic constraints under which they operate are already tightly regulated. They have to pass a regulatory test on members' involvement in order to be registered. We should therefore rely on the organisations' regulatory wisdom. Those who were fortunate enough to serve on the Committee know that we discussed the regulatory framework that might be applied to societies in future. The regulators would be obliged to consider such matters, as they do now.

As I predicted, the amendment has generated a good deal of interest. It is a rational and sensible addition to the Bill.

Stephen O'Brien (Conservative, Eddisbury)

I am happy to say that I believe that the amendment is sensible and justifiable. Like the hon. Member for South Derbyshire (Mr. Todd), I am glad that it has been tabled after our deliberations in Committee.

The hon. Gentleman made several important points in highlighting the reasons for the amendment. First, he dealt with third parties, who may transact with any entity that the Bill encompasses. They rightly start with the expectation that they are entitled to believe that those with whom they transact from the co-operative or community benefit society carry authority. That principle has informed the Bill's drafting. It is right that a transaction that may extend beyond the vires of the relevant entity's objects is called into question. If one purports to transact on behalf of an entity, it is vital that one has the authority to do that. It is important for third parties to know that the transaction has bound the entity, or whether they have left themselves personally liable for not acting within the proper authority of the co-operative or community benefit society.

The importance of the matter renders special resolution ratification procedure wholly appropriate. An ordinary resolution, albeit democratic, means that a majority of one is enough. Special resolution shows the intention, in the case of a problem, to have the full backing of all those who have at least a stakeholder interest in the co-operative or community benefit society.

Andrew Love (Labour/Co-operative, Edmonton)

The amendment would introduce a minimum time period. Should a maximum period also be introduced?

Stephen O'Brien (Conservative, Eddisbury)

Like me, the hon. Gentleman has the benefit of having acted as a professional company secretary before his political life. He makes an important point, which is of genuine practical importance to those who are responsible for ensuring full democratic notification and involvement. I shall deal with it in the course of my remarks.

Earlier, the difficulty of validation and of identifying to whom notice should be given was mentioned. I appreciate and readily accept that it may be difficult to have a live and reliable record of the full constituency of those who are rightly interested in the relevant entities. It is therefore important to consider not only whether there is a database and whether everyone can be reached by post, but a method of distributing information more widely. There is therefore an argument for considering a maximum time, which the hon. Member for Edmonton (Mr. Love) mentioned. However, we should start with an appropriate minimum time, which was the focus of many interventions that preceded my contribution.

It is appropriate to set a minimum period of

"not less than 21 days".

I would hesitate to propose a read-across from company law precedents in statute and through court cases that sought to clarify—or not—the law. It has become clear that such a time period is 21 clear days. I should like to believe that that precedent, set by the courts as an interpretation of statute, applies to the Bill. Those who know the arcane technicalities realise that the 21 days do not include the day of posting. There are 22 days from the time that the document leaves the office. It is important to ascertain whether there is a true read-across from company law or whether the precedent could inform what happens in the case of the Bill.

Gareth Thomas (Labour, Harrow West)

I accept the need for a special resolution process. However, to revert to my intervention on my hon. Friend the Member for South Derbyshire (Mr. Todd), I am less clear about why the special resolution process in this case is more important than such a process for demutualisation, which does not require a 21-day notice period.

Stephen O'Brien (Conservative, Eddisbury)

I shall try not to be led too far down a track that might incur your wrath, Mr. Deputy Speaker. However, I shall give a broad response to that important point. Statute must establish what requires special and ordinary resolutions. Today we are considering a matter that warrants special resolution. Perhaps the hon. Member for Harrow, West (Mr. Thomas) should leave until another day arguments for a special resolution process for demutualisation. There could be some valid and interesting arguments about that. If the Government proposed such a move, the hon. Gentleman and I might find ourselves on the same or opposing sides.

Demutualisation must reflect the entity's express wish. In the clause, we are seeking ratification of an action that has already taken place, which binds the entity to a third party. Although one could get into a principled argument about the hon. Gentleman's point, it is wholly appropriate to apply the special resolution process in the case that we are considering. He should wait for another day to present his arguments about demutualisation. Perhaps the Minister has more information, given that she is blessed with knowledge about the Government's intentions; I can only speculate on them.

A notice period of 21 days is appropriate, not least because delivery by post cannot always be guaranteed. It was argued earlier that large FTSE 100 plcs may have one or two shareholders who comprise 75 per cent. of the holdings. The plc of which I was group company secretary had 44,000 shareholders, of whom 24,000 represented approximately 67 per cent. of the shareholding. It is important to be able to demonstrate that one has made every effort to contact everyone to give them proper notice. That requires advertisements in appropriate newspapers. Many advertisements can make us flip the page over very quickly because they do not arrest the eye, but it is important that news should get around on the grapevine.

The 21-day period arose because of a habit that developed in Lancashire. The north-west has a fine tradition of co-operatives, and I am fortunate enough to represent a seat in Cheshire, whose co-operatives are combined in the United Co-op. The co-operatives in Lancashire had a thing called wakes week, when, in the old days, almost everyone used to go off on holiday. Sometimes that week's holiday would extend to a fortnight. Some companies were choosing to give notice of these meetings just as people were going on holiday, so the 21-day provision was introduced to ensure that people had got back from their holiday and had the opportunity to see the notice. Otherwise these things could all have been nicely stitched up while they were away. That is the historical explanation, and it shows that there was a good reason for the provision. The normal practice of taking a fortnight's holiday has not changed much since then, so there is a reasonable practical basis for the period being not less than 21 days.

Tom Levitt (Labour, High Peak)

I thank the hon. Gentleman for giving way. I recall that the outcome of the 1970 general election might have been different if it had not been held in wakes week. He talked about sending out letters; in this day and age, would he regard the posting of a notice on a website, or the sending of e-mails to members of a meeting, as suitable ways of announcing a meeting?

Stephen O'Brien (Conservative, Eddisbury)

One could get exceptionally excited about what constitutes a proper notice. It might be appropriate to ask the promoter of the Bill to bear that question in mind, so that he can answer it later. It is a well established practice that notices are either written or communicated by advertisement. I have not been involved in these technical matters in recent years, but I would be surprised if some form of letter—sent either by fax, e-mail or posting on a website—were not deemed to be a proper notice. That would seem to be a proper expectation, but all sorts of regulations and laws will be developed as our experience of these matters increases.

The 21-day provision is important because, when dealing with these serious matters, time must also be allowed in which to marshal the advice as well as the people. These matters can often involve quite technical legal and accounting issues, and it is important, for example, if people have an objection to what is taking place and wish to exercise their democratic right, that they have the chance to take proper legal advice on the matter. That can be difficult because they often have to go on a fundraising exercise first, to ensure that they can afford the legal bill. That happens in relation to popular objections to planning applications just as it does to members of a co-operative society who might feel that they have not been properly served by those in executive charge. Those are remote circumstances, but we must give people every opportunity, in the process that we enact, to get the best possible advice.

We must also bear in mind that the 21-day provision will provide the opportunity for a number of meetings to take place in which the matter could be resolved in a rather less flamboyant way. That is often the best way to resolve these issues, and the meeting could always be withdrawn if they had been resolved in a satisfactory manner. Sometimes that can be better for the society. Seven or 14 days would not be enough. I do not think it necessary to have a maximum period, because there would be serious objections from those who wanted to exercise their rights if the matter were not resolved with sufficient dispatch. There is nothing like adverse publicity to make people act rather fast. I am happy to add to some of the arguments that the hon. Member for South Derbyshire has already made in support of the amendment, and I am happy to give our support to it at the same time.

Gareth Thomas (Labour, Harrow West)

I rise simply to ask the Minister to clarify the point that I made in interventions on my hon. Friend the Member for South Derbyshire (Mr. Todd) and the hon. Member for Eddisbury (Mr. O'Brien) about why a 21-day notice period is so important in regard to a special resolution but not to other ordinary resolutions or to what is surely the most important resolution that can come before a co-operative or a community benefit society, namely, a resolution to transform the organisation into a company or some other corporate structure. I should say that I do not intend to go to the barricades over this issue. Clearly, that would be daft. I recognise already that my point is not accepted by my hon. Friend the Member for South Derbyshire or by the Conservative Front Bench. I fear that it would probably not be accepted by my own Front Bench either. Nevertheless, I must ask whether this is Treasury prudence gone too far, whether a lawyer has run amok while giving advice to my hon. Friend the member for South Derbyshire, or whether there is some other genuine reason, which I have missed, that a 21-day notice period is so important in this instance yet not in the instance of any other general meeting or resolution process for a co-operative.

Richard Allan (Liberal Democrat, Sheffield, Hallam)

The hon. Member for South Derbyshire (Mr. Todd) made a persuasive case for his amendment in the face of some vigorous cross-examination, which he was bold enough to invite on himself at the beginning of his speech. He seems to be adopting a belt and braces approach, in that the rules of a society should anyway allow a decent period of notice to be given before a meeting to discuss an issue of such importance, but some may well not do so. He is trying to prevent a board from bouncing the membership into accepting an action that it has taken that is outside its terms of reference, and it is entirely proper that he should do so.

Comparisons have been drawn with the period of time allowed for a company to hold such a meeting. A better comparison would be with the time that we allow for an election to take place. The hon. Gentleman made the point very effectively that it is the democratic nature of the society that is important, and that there has to be a decent period of time for the democratic debate to take place. I accept that that supports the point that was made about demutualisation—

Gareth Thomas (Labour, Harrow West)

rose—

Richard Allan (Liberal Democrat, Sheffield, Hallam)

I give way to the hon. Gentleman.

Gareth Thomas (Labour, Harrow West)

I was merely trying to make a full round by taking on the Liberal Democrat Front Bench on this issue at the same time as every other Front Bench. If the hon. Gentleman fears that a board might seek to bounce members on this issue, why might it not seek to do so on a demutualisation issue? That was certainly a feature of building society demutualisations in the 1980s. Why should there be a 21-day notice period for this issue and not for others?

Richard Allan (Liberal Democrat, Sheffield, Hallam)

Speaking personally, I have every sympathy with the hon. Gentleman's argument. Sadly, we are not able to debate demutualisation today. Instead, we are debating the more specific requirements of the Bill. In that context, the hon. Member for Eddisbury (Mr. O'Brien) made the important point that this provision relates to a very important special resolution because it deals with contracts made with third parties and with powers being exercised ultra vires. He built a persuasive case for the 21-day notice period.

Stephen O'Brien (Conservative, Eddisbury)

The hon. Gentleman rightly points out that this measure is important—to answer the question posed by the hon. Member for Harrow, West (Mr. Thomas)—because it affects third parties, not because they would find that their contract had been voided, but because the executives could have a personal liability. In demutualisation cases, those who have an interest determine the interest for themselves and each other. There is, therefore, a difference between a third-party interest and a mutual interest.

Richard Allan (Liberal Democrat, Sheffield, Hallam)

That point is well made. It is open to the membership of an organisation to change its own rules so that any demutualisation vote would be able to take place only after a specified period of time. The fact that one can set one's own rules covers many of the potential difficulties that have been mentioned today—the way in which notices are sent out, the conduct of the campaign of notification ahead of a meeting, and the issue of a maximum notice period, for example. One would hope that all those issues would be covered by the general rules of the society. Indeed, one would hope that it would not have been registered as a society if its rules did not cover such issues. The membership should ultimately have the power to take action if they feel that the board is behaving inappropriately by, for example, causing excessive delay. The essential point, however, which has been well put, is that we are dealing with third-party contracts and liability of board members. That means that there is a reason to specify the minimum period, and 21 days seems entirely appropriate to allow the democratic debate that must take place before such a meeting should occur.

As I read the proposal, I imagined the scenario at a special meeting when the vote had been lost. What would occur in a society then? It could face meltdown, although we would have set out rules to allow the process to take place properly. That is outside the scope of today's debate, but, all those thresholds having been set, a board would clearly have to be careful in terms of undertaking the procedure. There is no sense in the clause that we are trying to give the green light to people saying, "Go outside your powers and simply go through the procedure to get support." That would be risky, so we are trying to make the procedure as empowering as possible for the members so that they do not feel, at any point, that they have been bounced through it.

Ruth Kelly (Labour, Bolton West)

I congratulate Members on the quality of the debate. My hon. Friend the Member for South Derbyshire (Mr. Todd) set out a persuasive case for his amendment and the hon. Member for Eddisbury (Mr. O'Brien) brought a touch of his experience and history to these matters. I have learned some things in the Chamber today. My hon. Friend the Member for Harrow, West (Mr. Thomas) also brought his experience to the issues, which I intend to touch on in a few moments. My other hon. Friends also made valuable interventions.

My general principle in working on the amendment with my hon. Friend the Member for South Derbyshire, and on the provisions in clauses 2 and 3, has been to allow industrial and provident societies to benefit from the same freedoms that apply to companies. We have therefore taken companies legislation as our base and mirrored those provisions as closely as possible, where appropriate, for industrial and provident societies. I should perhaps emphasise the words "where appropriate", because I agree with my hon. Friends that, in any particular area, it is important to consider carefully whether exactly the same provisions that apply to companies should equally apply to industrial and provident societies. Of course, it is relevant to consider each and every case, including the 21-day notice period.

Clause 3 sets out the implications for acts done by a society that are beyond the powers given to the society and its rules. It would allow members of societies to ratify such acts retrospectively and grant relief from any resulting liability to committee members, in each case through a special resolution. The clause goes on to define the procedures for a special resolution. For example, it specifies that the resolution must be

"passed by not less than 75 per cent. of"

members entitled to vote. That mirrors the procedures required in company law for a similar resolution to be passed.

Company law also requires at least 21 days' notice of a general meeting to pass such a special resolution, and the amendment would make the same provision in society law. I say to the House that 21 days is a minimum protection. The decision is perhaps equally important for companies as for societies in considering a special resolution, so 21 days seems appropriate, but, beyond that, we do not want to be too prescriptive for many of the reasons set out today, particularly by my hon. Friend the Member for South Derbyshire. Those include the diverse nature of societies, how they inform members, their constitutional rules and so forth. As a minimum period, 21 days seems reasonable.

To return to the point raised by my hon. Friend the Member for Harrow, West in relation to other resolutions that are debated and required minimum notice periods, the debating of such resolutions by societies is extremely important in the example of demutualisation. Indeed, one might argue that it is equally important, although I understand the point made by the hon. Member for Eddisbury that third parties are affected by the issue under discussion today.

Other important checks are in place in respect of demutualisation resolutions. For example, two meetings are required, with notice being given before each. For the first meeting, the notice period is left to the society's rules. For the second, there is a minimum of 14 days. One might consider the combination of the two to be more onerous than a 21-day minimum period required for a special resolution under the amendment, so 21 days strikes me as a reasonable minimum for debating such a resolution. I therefore support the amendment on those grounds and agree that we should align the procedures in this area more closely with the provisions in company law. I commend it to the House.

Amendment agreed to.

Amendment made: No. 8, in page 6, line 25 [Clause 3], at end insert—

'(c) in relation to a society whose registered office is situated in one of the Channel Islands, means a society established for charitable purposes only ("charitable purposes" having the meaning given by the law of the Island in question).'.—[Mr. Todd.]

Clause 9 — Short Title and Extent

Andrew Love (Labour/Co-operative, Edmonton)

I beg to move amendment No. 9, in page 12, line 4, leave out 'Industrial and Provident' and insert 'Cooperatives and Community Benefit'.

The amendment would give the Bill a new short title, but the important thing is that the change would apply to all Acts of Parliament from the 1965 consolidating measure that brought together all previous industrial and provident societies Acts, right through to the excellent Bill promoted by my hon. Friend the Member for Harrow, West (Mr. Thomas) and carried by the House last year. The amendment's net effect would be to change "industrial and provident" to "co-operatives and community benefit" in all parts of the law. While that change is deceptively simple—people might say that in many ways it is modest—it is fundamental to the modernisation of industrial and provident society law.

The amendment is probing, because, like my hon. Friend, I am not going to the barricades yet. However, an important principle is involved, which I raised on Second Reading, as did my hon. Friend the Member for South Derbyshire (Mr. Todd) and the hon. Member for Eddisbury (Mr. O'Brien), and it has been touched on again today. I am rather disappointed that it was not taken up in Committee, because we could have had a useful discussion.

Interestingly, the Bill is called the Co-operatives and Community Benefit Societies Bill. The reason for that could be that, last year, my hon. Friend the Member for Harrow, West introduced his Industrial and Provident Societies Bill, so that title was not available, although I think that a more important principle is involved. That is, of course, the modernisation agenda as it relates to industrial and provident societies, which is reflected in the strategy unit report "Private Action, Public Benefit".

In that report, the modernisation agenda was endorsed by the Prime Minister himself, who said in his foreword:

"This report sets out a package of measures which will modernise the law and enable a wide range of organisations to be more effective and innovative, whilst maintaining the high levels of public trust and confidence which are vital to the continued success of the sector."

I strongly believe that the name change would contribute to a number of things, such as organisational effectiveness and achieving the public trust and confidence that we want to see in this sector of the economy, both of which are referred to in the foreword.

The strategy unit report was published in September 2002 and the consultation concluded at the end of December. Other Members will comment, I suspect extensively, on that report. It is important to review what that report said about the name change. It is easy to understand why we need a name change.

Yesterday, when I was thinking about this debate, I realised that I had better look up what "industrial" and "provident" mean. I cannot relive the debates in the House in 1852, but I looked up the word "industrial" and the dictionary definition is "of the nature of industry or productive labour". I tried to associate that with the consumer co-operative movement, with agricultural and worker co-operatives, and even with community benefit societies such as football trusts and housing associations. It is difficult to associate any of those activities with the dictionary definition of "industrial".

Similarly, the dictionary definition of the word "provident" is "careful in providing for the future". We could argue about that in respect of the provision of pensions, and I suspect that the Government strongly want to get across to people the message that they should look after themselves when they reach senior citizen status, but the term does not have any contemporary relevance to the organisations that are concerned with the law as it stands. It is redolent of a 19th century, Dickensian, Victorian vision. There were visionaries at that time, but these terms are not relevant to the 21st century.

Claire Ward (Labour, Watford)

For many young people, their main connection with a community benefit society is probably through the new football supporters trusts. For them, that is clearly a community benefit, yet it would have no connection with the concepts of "provident" or "industrial". Would not it be helpful in our approach to the next generation to use terms that they understand and appreciate?

Andrew Love (Labour/Co-operative, Edmonton)

I agree entirely with my hon. Friend. It is an immediate turn-off for organisations that are thinking about establishing new bodies and are considering the different structures available to suggest that they form an industrial and provident society. There is no way that young people, or I suspect people of any age, will be attracted by that terminology. We need to move on and find a modern language to reflect what can be achieved by these societies.

Tom Levitt (Labour, High Peak)

Is my hon. Friend arguing that the sector needs to increase public trust and confidence, because it lacks that? Does he believe that merely changing the name will produce the extra public trust and confidence that I am sure we all seek?

Andrew Love (Labour/Co-operative, Edmonton)

The organisations that are formed under industrial and provident society law critically depend on public trust and confidence, so the need to ensure that they have that trust and confidence is a strong priority for them. The reason that I suggested a change in title was more fundamental. I think that it will improve trust and confidence, because it will improve people's understanding of such organisations.

If we are to modernise the structures, as this Bill does, as the Bill introduced by my hon. Friend the Member for Harrow, West did and as I hope will be the outcome of the strategy unit report, we must also modernise the language that is associated with these organisations. Although there was a 1965 consolidating Act, these structures date back to laws that were passed in 1852 and 1862. We still use those structures as a basis, and we still use the language of that time.

That language may have meant something at the time, and may have given Victorians and people who lived in the 19th century a vision of what industrial and provident societies were trying to achieve. I do not think that that applies at the present time. I shall take the example of a football trust, which was mentioned earlier. I was involved in the formation of a football trust in Enfield. The old Enfield Town football club has gone through considerable difficulties in the past few years. In an effort to mobilise its support, it decided to set up a football trust. It is an admirable organisation, and is working successfully. I attended meetings, and I put them in touch with the national organisation set up by the Government. When we got down to the nitty gritty of discussing how the trust would be formed, someone said, "Lads, it has to be an industrial and provident society". Hon. Members can imagine that the response was, "What the **** is an industrial and provident society?". It had no relevance or meaning to them. That is the problem that we face.

The strategy unit report referred to modernisation of industrial and provident society law. A number of issues were emphasised in the report that are relevant to the debate on this amendment. I was involved in the retail co-operative movement, and I remember with dismay that everyone who tried to explain what it was would always start with its glorious 19th century heritage and would not talk about its 21st century relevance. That is an important consideration in this debate about the language.

That terminology is off-putting. It is not possible to attract people using the language that is current in the laws that cover industrial and provident societies. They have a poor brand image. How do we get people who are trying to form an organisation to consider industrial and provident societies when there is such low public esteem for those bodies? The term is out of date and needs a fundamental overhaul.

This is a critical issue for important sectors of the economy. It is not just new organisations that are being formed. In significant parts of the economy industrial and provident societies are already of relevance and constitute a majority in that activity. I could talk about the housing or agricultural co-operative movements and credit co-operatives, but I shall use the example of the retail co-operative movement, because it is the one best known to me and, I suspect, to other hon. Members. It has 115,000 staff members, most of whom do not have a clue what an industrial and provident society is. Frankly, if one tried to raise the issue with them, they would be put off by the idea. It has 9 million members, and although they are aware of the caring, sharing difference of co-operatives, as the old brand image used to call it, they do not understand what it is. We must do something about the problem of language.

The strategy unit report recommended that we set down a definition for co-operatives. As well as using the terms "co-operatives" and "community benefit societies", we should define them.

When it comes to community benefit societies, we could have the same argument about football trusts. The organisations that I know best are the registered social landlords: the housing associations. They are a big sector of the housing market. In recent years, half a million properties and tenancies have passed from the council sector to the housing association sector. It is rapidly becoming the largest social housing landlord in the country, yet it still uses this completely outdated terminology of industrial and provident society. Let us suppose that someone is trying to persuade a tenant that a transfer from council to housing association accommodation would benefit him or her. That cannot be done in the language of the 19th century.

The importance of comprehensibility is stressed in the strategy unit's report. There is little recognition of the advantages of industrial and provident societies. If they were known as co-operatives and community benefit societies, people would have a much better understanding of what they were. There is also little recognition of the difference between industrial and provident societies and companies. Most people have a vague idea of how a company operates, with shareholders and shareholder value and profits and dividends; but they have no real understanding of the nature of an industrial and provident society. We must also do something about the weak branding and the negative image. A critical factor in that is modernisation of the language.

Industrial and provident societies face other problems in the marketplace: the lack of protection for their assets, for instance, and the threat of demutualisation, which is always there. They also have difficulties in raising money. I used to be a member of a revolving loan fund for co-operatives. Co-operative after co-operative used to tell us of the impossibility of raising money from bank managers or any other financial organisations, because no one understood what co-operatives were all about.

A good deal of complexity is involved in industrial and provident societies. My hon. Friend the Member for Harrow, West has concerned himself in recent years with the problems of registration—the cost, and all the time and effort that must be put in.

David Lepper (Labour/Co-operative, Brighton, Pavilion)

My hon. Friend mentioned the brand image and the use of the word "co-operative". Is not a prime instance of that word's attractiveness the success of the Co-operative bank over the past few years? It has assets of £5.5 billion and more than 4,000 staff, and has gone from strength to strength. Many people have moved their accounts to it because of the appeal of the name, and the sense of community benefit and ethical trading that they gain from it.

Andrew Love (Labour/Co-operative, Edmonton)

The Co-operative bank is indeed a brand leader in its financial services sector. It established free banking some time ago, and it continues to set standards for the rest of the industry. I also pay tribute to the Co-operative Insurance Society, which works closely with the bank. It has done much, in a variety of ways, to establish a more ethical stance for financial services organisations—and the word "co-operative" is central to its activities. That underlines my point that if we are to improve the image we must change the language. The current image engenders a lack of trust and confidence because of the outdated language.

Costs arise because of the way in which industrial and provident societies are composed, and because not enough people choose them rather than companies. As I have said several times today, a level playing field must be created between all the different organisations in the economy: that is crucial to the future of industrial and provident societies. It is easy to see why so many new companies are formed each year and so few industrial and provident societies. In fact that would probably happen anyway, but I think many people who are not opting for industrial and provident societies now would do so if we only modernised the language.

The company law review has been mentioned. There have been a number of Companies Acts in recent years, but since 1965 there has been only one piece of industrial and provident society legislation, initiated by my hon. Friend the Member for Harrow, West. Let us hope that this will be the second. Both, however, have been instigated by private Members, and have been given very little time in comparison with measures relating to company law and law reform, and indeed the review with which we shall be presented in the near future.

I pay tribute to both my hon. Friends for their Bills. I am particularly impressed by this Bill. The proposals relating to assets in clause 1 are at the cutting edge of modernisation of industrial and provident society law. If the legislation is to succeed, however, we must also be at the cutting edge of linguistic change. Not only will my amendment take the language of industrial and provident societies into the 21st century. but; "Co-operatives and Community Benefit" will give people a more accurate picture of what is entailed in the establishment of such societies, what they are and what they do. The sector will also become much more relevant to the economy, and, hopefully, will be given an impetus to involve itself in different parts of the economy.

I believe that my proposed new title is both user-friendly and public-friendly.

Stephen O'Brien (Conservative, Eddisbury)

It comes as no surprise to me, as a fellow member of the Institute of Chartered Secretaries and Administrators, to hear such a fine speech—entirely in order, or you would have pulled him up, Mr. Deputy Speaker—from the hon. Member for Edmonton (Mr. Love). He spoke for even longer than the Bill's promoter.

The hon. Gentleman said that this issue was mentioned on Second Reading. As he will recall, it was very much mentioned in Committee, and as he knows, I support him. I too have been ably supported by the Co-operative Group. I thank Peter Hunt, of that organisation, for his briefing—and, not least, I thank my constituent Mr. Martin Beaumont, the chief executive, for his.

Without wishing to go down the highways and byways of the great historical treatise that we have been just treated to, it would be highly desirable to change the name to the Co-operatives and Community Benefit Societies Bill. In fairness, it was touched on in Committee. Despite the extraordinary thoroughness of the presentation by the hon. Member for Edmonton, it is, as he said, only a probing amendment. That said, it was, to say the least, an exceptionally good exploration of the subject.

It would be wrong not to record that the Minister said in Committee that the Government were not opposed in principle to the idea but that there were genuine technical issues about changing the name of legislation that belonged to a family of legislation with a long history. With the best will and intent, and the unquestioned skills not only of parliamentary draftsmen but of all the advisers with a view on these matters who work in Government Departments, it is possible, given all the cross-references, notwithstanding the technology available these days through electronic reading, to miss something and have difficulty in achieving the consistency required.

It is certainly a worthwhile project. It could be used as a model of how to try to update the titular effect of Bills, equivalent to the tax law rewrite. It might be useful to review what is on the statute book and where titles can be changed, not least because we would realise how much law could be repealed. It would be desirable to make the statute book less long.

In looking at the new name for the Bill, I could not help but feel that there was a certain equivalence when news was brought to me on the Front Bench this morning that the right hon. Member for Hamilton, North and Bellshill (Dr. Reid) has been appointed Leader of the House. He had a great record—I pay tribute to him—for being a man of communities benefit when he was Secretary of State for Northern Ireland. I like to think that we can all benefit from the community of interest that he will seek to introduce, in one of his new roles, in safeguarding the interests of all hon. Members. Both I and my party offer our congratulations on his transfer.

When I looked at the other aspect of the recommended name, the co-operative side, I was reminded of the announcement of the new Labour party chairman, who has a particular—

Alan Haselhurst (Deputy Speaker, Saffron Walden)

Order. I think that the hon. Gentleman has paid tribute enough for the moment.

Stephen O'Brien (Conservative, Eddisbury)

I might possibly have to crave your indulgence, Mr. Deputy Speaker, because I feel that I have left Labour Members on tenterhooks as to who the new chairman of their party is—

Alan Haselhurst (Deputy Speaker, Saffron Walden)

Order. I am sure that hon. Members and the House as a whole are more intent on seeing the successful completion of this debate than on any other consideration.

Stephen O'Brien (Conservative, Eddisbury)

I will do nothing more than allude to the fact that the right hon. Member for Makerfield (Mr. McCartney), a man of the most co-operative style, is the new chairman of the Labour party.

I am happy to say that I and indeed my party, as part of the consensual approach that has been adopted throughout the Bill's proceedings, favour the idea of the change of name, if it can be achieved in a technical and thorough manner. It is, therefore, appropriate that the hon. Member for Edmonton has suggested that the amendment is a probing one. It would be difficult today to give a conclusive view for the Government; the Minister mentioned the difficulty when we looked at the matter in Committee. With a flag that we would like the proposal to move forward and hope that there will be a thorough exercise, at this stage of the Bill we are keen that the hon. Member for Edmonton should seek to withdraw the amendment once we have had an opportunity to explore the issues.

Gareth Thomas (Labour, Harrow West)

I hesitate to gatecrash the love-in between the two members of the Institute of Chartered Secretaries and Administrators. I congratulate my hon. Friend the Member for Edmonton (Mr. Love) on the way in which he has introduced the amendment and the hon. Member for Eddisbury (Mr. O'Brien) on initiating a discussion on the issue in Committee. I, too, accept that this may have to be a probing amendment; some miserable lawyer somewhere may find reason to object to what is an entirely sensible provision, which, as my hon. Friend said, is recommended in the Government's strategy unit report into the charitable and not-for-profit sectors.

Hon. Members who have had the opportunity to introduce a private Member's Bill will recognise that many members of their constituency party often take a profound interest in the subject that they seek to take forward. Last year I approached a number of my party members and explained that I was introducing a Bill to amend the Industrial and Provident Societies Act. I was disappointed somewhat by the blank look on the faces before me. Having had representations from those party members to ban fox hunting or to amend various other legislation, there was some disappointment that I was seeking to do something to legislation that they had not even heard of. That gives some indication of the problems that the amendment seeks to deal with.

Once I had got over that disappointment and was researching the types of organisations that would be affected by the legislation, I discovered that a series of organisations such as rugby clubs and women's institute country markets were industrial and provident societies. When I got in touch with my local women's institute country market and my local rugby club and asked "Are you a company or an industrial and provident society?", they had no idea what an industrial and provident society was. I only discovered that they were registered under that legal form in discussion with their parent bodies. That shows some of the difficulties that a failure to modernise the terminology to describe this form of community organisation causes that sector. It is long overdue that we bring into the 21st century the terminology that we use to describe community businesses.

The Government's intention to legislate to create a community interest company is an entirely sensible, albeit separate approach, to other forms of community businesses. I hope that we will hear from my hon. Friend the Minister a similar commitment to modernise the legislation in this way.

My hon. Friend the Member for Edmonton has done the House a service by seeking in his amendment to restate the case for sensible legislative change. I hope that, if we cannot reform the legislation in this way now, we will have an early commitment from the Minister to initiate the change that we want to see.

Ruth Kelly (Labour, Bolton West)

I congratulate my hon. Friend the Member for Edmonton (Mr. Love) on the way in which he introduced his amendment. As he has said, he has shown a consistent interest in this matter. I am aware of his concern about the use of the term "industrial and provident society", particularly the points that he made about whether the term is outdated and well understood, whether it should be replaced by what some regard as more modern, more descriptive terminology such as co-operative and community benefit society. The strategy unit report looked at the issue and concluded that the name "co-operatives and community benefit societies" should be retained and that the umbrella term, industrial and provident society, should no longer be used.

As I said in Committee, we examined the responses to the public consultation on that report. I hope to make our response to those recommendations soon. Nothing in the legislation requires societies to call themselves industrial and provident societies, but it does require that the title of every society must end in the word "limited". The term "industrial and provident society" is used in the title of the relevant Acts and in some of the substantive provisions of the Friendly and Industrial and Provident Societies Act 1968 and the Industrial and Provident Societies Act 2002. The proposed amendment would not change the names of the previous Acts or the substantive provisions in which the term "industrial and provident society" occurs. Societies would continue to be registered under the Industrial and Provident Societies Act 1965.

I recognise that part of the issue is presentation and branding, and how the movement and individual societies wish to present themselves. My hon. Friend the Member for Edmonton made a powerful case about the members of football clubs and whether they see themselves as members of industrial and provident societies. Given the case that he and others have made, we considered whether we could introduce an enabling provision to facilitate a change in the names of industrial and provident society Acts and to amend all other legislation that contains references to those Acts. Unfortunately, we decided that such provision was outside the scope of this Bill. Moreover, changing the names of those Acts would probably be unhelpful at this stage. It would apply a collective title to Acts that individually bear different titles and that would make the legislation less transparent and more difficult for societies to navigate. For those reasons, I urge my hon. Friend to consider withdrawing his amendment.

Mark Todd (Labour, South Derbyshire)

Unfortunately, it has fallen to the Minister to give the boring and disappointing answer to this interesting debate, but her response was not unexpected. She has done her duty. It is worth reflecting for a moment—I still fancy myself as a historian—on the reasons for choosing the term "industrial and provident society" to describe that sector of activity.

I have mixed feelings about the amendment. It is logical, in the modern day, to describe the movement in a way that is much more recognisable to ordinary individuals, especially—as my hon. Friend the Member for Watford (Claire Ward) said—to young people, who would not necessarily be aware of the background of those organisations. However, I am always struck by the extraordinary endeavours of those who founded, in Victorian times, the movement that we are discussing today and—as my hon. Friend the Member for Edmonton (Mr. Love) mentioned—the respect that we owe to people who struggled to set up organisations that provided a wide range of benefits for working people at a time when the state did not so provide and they relied entirely on their own endeavours through voluntary groups.

The original legislation in 1852, which started the process, was moved by the then hon. Member for Shrewsbury. I cited that Bill's preamble on Second Reading, but not everybody was here then. It states:

"Associations of Working Men have been formed for the mutual Relief, Maintenance, Education and Endowment of the Members, their Husbands, Wives, Children, or Kindred, and for procuring to them Food, Lodging, Clothing, and other Necessaries, by exercising or carrying on in common their respective Trades or Handicrafts."

That is a good description of industrial and provident societies as they operated at that time. For example, hon. Members should note the reference to "working men". Sexism was automatic at the time and we cannot criticise people for using in 1852 language that we would not accept now. The legislation was designed specifically to benefit working people, who did not have such services available through any other means and who had sought to come together, often in the face of considerable obstacles, to create those institutions. The reference to industry—also contained in the reference to "Trades and Handicrafts"—makes it clear why the word "industrial" was chosen at the time.

The word "provident" is not commonly used today, but the word "prudent", which is commonplace in the Treasury, has had a welcome revival, and the same might happen to "provident". It has the clear meaning of making sensible provision for future needs, which is clear in the original purpose of the legislation.

The movement moved on and did not remain confined to working people. Any person from any background, as confirmed by the examples given by my hon. Friend the Member for Harrow, West (Mr. Thomas) and others, can now become involved in such societies and seek to further a variety of goals that the Victorians never conceived of. I defend the use of the language at the time, because it was appropriate and clearly defined the organisations that existed in those days. I also salute those people who wisely provided the legislative framework to permit such institutions to carry on their business safely in law at that time, but I accept the arguments advanced by my hon. Friend the Member for Edmonton. He pointed out that whatever the benefits and merits of the description then, it does not apply in present circumstances.

I note the Minister's words with regret, albeit tinctured with some relief that we shall preserve in the legislative framework references to farsighted behaviour by hardworking individuals. The profound implications of the judgments that they made show that we owe them great credit. I hope that my hon. Friend will withdraw his amendment, but I respect his reasons for moving it.

Andrew Love (Labour/Co-operative, Edmonton)

I have always thought of the Chancellor as a modern-day Rochdale pioneer, although I raise that point with some trepidation in case the hon. Member for Eddisbury (Mr. O'Brien) jumps up to tell us that we have someone new in that post. I wish to correct an earlier mistake and pay tribute to the founders of the co-operative movement and the community benefit movement, including the Rochdale pioneers of 1844 and J. T. W. Mitchell—a person of very humble origins—who was the chief executive of the Co-operative Wholesale Society in 1895 and took part in an investigation by a Committee of the House of Commons into retailing. His comments and his vision for the future are due great respect, even today.

David Lepper (Labour/Co-operative, Brighton, Pavilion)

In my hon. Friend's catalogue of pioneers of the co-operative movement whom he congratulates, I am sure that he would want to include Dr. William King and those others who in the early 1820s, some 20 years before the Rochdale pioneers, set up a co-operative retailing shop and a working men's institute based on co-operative principles in West street in my constituency.

Andrew Love (Labour/Co-operative, Edmonton)

I do of course pay tribute to Dr. William King. I also pay tribute to George Mudie—not the Member of this House—who set up the London Co-operative Society. Some in Scotland—looking round the Chamber, I can see that there are no Members from Ayrshire here—lay great claim to the Fenwick weavers having been the originators of the co-operative principle. Whoever it was, I pay great tribute to the endeavours of all the people who created the movement that we have today.

I freely admit that my amendment has some shortcomings, as the Minister said, but it allows me to refresh the House on the importance of changing the language in this respect. I take note, as we did in Committee and on Second Reading, of the fact that the Treasury is looking carefully at the strategy unit report and will bring forward recommendations resulting from that in the near future. I also take note of the positive way in which the Minister responded to my amendment. I can feel some sympathy for its terms, although I recognise that it does indeed lie outside the scope of the Bill. I hope that the Minister and Treasury officials will give serious consideration to the strategy unit report and to its recommendations in general, but in particular to the recommendation that we should change co-operatives and community benefit societies. I hope that they will take note of the sentiment of this House, which has been strongly expressed on several occasions, not only by me, but by Back-Bench Members of all parties. Given those considerations, I hope that the Minister will make proposals that reflect them.

On the basis of the assurances that she has given, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Order for Third Reading read.

Mark Todd (Labour, South Derbyshire)

I beg to move, That the Bill be now read the Third time.

It is pleasure to introduce the Third Reading of the Bill, which has occupied a significant amount of the time of the House and of hon. Members who served on the Committee.

Let me briefly refresh hon. Members' memories as to the key purposes of the Bill and its implications. The first purpose is to remove arcane obligations on societies on the execution of agreements of various kinds. For example, clause 5 relates to the use of society seals, the way in which they are kept and operated, their function and indeed the necessity of having them at all. That has already been commended by many as a means by which a number of societies will be able to make significant savings in terms of money and administrative time in the course of their activities. It is a modest change, but one that has beneficial implications.

The second purpose is the protection of business partners of societies should they inadvertently or—as we discussed earlier—deliberately breach the objects of their constitutions. We all accept that it is important that those who have business dealings with societies should have equivalent protection to those who deal with a company and should not be caught out by someone being able to point out that the society has traded outside its objects. In that case, the contract struck is ultra vires, which places that entirely innocent partner in the position of potentially losing significant sums of money. Those provisions are covered in clauses 3 and 4. Particularly as a result of additions to those clauses, the Bill has been dramatically extended from the Bill that received Second Reading. I had imagined that if the House continued to have faith in it and it passed through another place I would have a relatively modest little package of paper to present to people and say, "This private Member's Bill has been passed partly through my endeavours." It will now be a slightly larger package of paper because the amendments, particularly on this matter, have lengthened it considerably. To be fair, they set out the protections in much more detail and therefore perhaps with greater legal protection for those who are covered.

The third protection, which is a new element that was introduced in Committee, but is certainly valuable, is to ensure that societies that are also charities make clear that status to those with whom they form contracts. That is because those contracts will not be protected in same way as those that are made by societies that are not charities. The key element here is the balance of protection involved. It is right that the membership of a society who intend further to extend their own benefits should be treated in the same way as a company in terms of the protection of third-party contracts. However, that is not so in the case of a charity that seeks to serve the interests of third parties. It is clear in law that the assets and objects of that charity should be protected with greater rigour than is obliged in the case of companies or—after the passing of the Bill, if that is willed—co-operatives and community benefit societies. It is vital that the fact that a society is a charity is made crystal clear to anyone who seeks to make a contract with it. That effectively challenges the individual or body making that contract to look carefully at the objects of the charity to ensure for themselves that they are engaging in a contract that lies within the scope of the charity's objects, because they will not enjoy the equivalent protection that they would if they had been dealing with a community benefit society or a co-operative that was not a charity. Clause 2 covers that at some length. It is an important point for a small sector of activity.

The final element of protection is the framework to give community benefit societies new rights to bind their assets and the proceeds of any assets that are disposed of to the purposes of the society, albeit that such purposes may be carried out through another vehicle. It is recognised that it may be appropriate to change the framework through which the object is delivered, provided that the same obligation applies to that new vehicle: in essence, that the assets may not be disposed of to those who happen to be members of the society at that time, but must be used for the purpose involved. On Second Reading, in Committee and on Report, reference was made to the importance of that provision; for example, to community benefit societies that are football trusts. Although the precise purpose may have become redundant, it is important that the society's original aim should continue to live in its assets and should be transferred to another society with similar aims. That is the purpose of the Bill.

The implications of the Bill are that it would bring the relevant legislation broadly into line with equivalent company law. It would make it easier for societies to carry out the normal business of making agreements, contracts and conveyances with other bodies, without an additional bureaucratic burden or unintended risk. It could make societies slightly more competitive than they are currently; it would save them some time and money and would make it possible for them to pursue their interests more effectively and speedily.

The asset lock clause lays the foundation to allow the implementation of one of the recommendations of the strategy unit's report, "Private Action, Public Benefit", which has been mentioned several times this morning. Incidentally, that report has received as wide a range of accolades for the quality of its thinking and the comprehensiveness of its recommendations as any report from a public institution for some years. It is pleasing that part of the Bill would implement an aspect of its recommendations.

Lack of an asset lock provision could prevent the safe use of a community benefit society model in some circumstances; for example, in public service provision. I have long argued that some services are better delivered through a voluntary sector model, or at least one that engages with the customers or residents who use that particular service. For example, a particular village may have a direct personal interest in the way that its services are run, but there should be public support for such services, perhaps through the transfer of an asset and certainly through the provision of public money. If one were to follow that path, it is critical that there is a way of locking those assets into that particular purpose. It would be wrong if those who happened to be residents or qualifying members of a particular society were able to say, "Thank you very much, we'll take the proceeds and use them for whatever we have in mind or for our own purposes", through using the escape clauses—turning into a limited company by guarantee—that were discussed on Second Reading. The Bill thus affords a valuable opportunity to use community benefit societies as a means of delivering public services with the benefit of public assets and public money.

I shall refer briefly to my personal history. I served on Cambridge city council for 12 years, three of them as leader, and always held the view that one should try to find ways of engaging with our citizens. Often, in Cambridge, they were willing to be engaged; they did not need much prompting. My hon. Friend the Member for Cambridge (Mrs. Campbell) is not in the Chamber today, but I am sure that she would agree.

As a member of the council, I wanted to provide ways for citizens to exercise more direct control. Cambridge is a city with a profusion of voluntary sector, charity and industrial and provident society activity. It would have been marvellous to have found ways safely to transfer some services to some local residents through the means proposed in the Bill. However, one could not do that then; the Bill would provide the basis for such judgments.

I willingly thank the Treasury team for its help with the Bill and in preparing substantial additions to strengthen it. Through their help in preparing the definitions in clause 1, the Government have set out the means by which the asset lock protection would work after appropriate detailed consultation. They rightly provided that there should be an obligation to consult and set out the type of issues on which consultation would be required. The Bill would allow the implementation of the asset lock through regulation after consultation. It is not the perfect model; I should have preferred to include rather more such definition. However, clause 1 is sufficiently constrained to reassure those who feel that the measure would be an open door for a variety of procedures. It is quite restrictive and obliges the Government to draft the regulations so that they clearly define how an asset lock would work and its implications for the community benefit society that would use it. The simple model would be where new community societies chose to adopt an asset lock at the start of their activities, while the more complex model would be where an existing community benefit society chose to adopt the asset lock and persuaded its existing membership of the need to follow that approach.

Those who have followed the Bill with interest will want to monitor the Government's progress in drawing up the necessary regulations. Obviously, the timing will be dependent on the officials and Ministers who guide the process; nevertheless, I am encouraged by the enthusiasm and commitment shown by the Treasury so far. It indicates a firm intent to proceed at a reasonable pace.

In conclusion, this is a modest Bill. As the person who was first in the ballot for private Member's Bills, I had a large number of Bills suggested to me—some of which could certainly not be described as modest. However, one of the several provisos that I made in deciding which Bill to promote was that I wanted a Bill that would not restrict freedoms. In some circumstances, restricting freedoms is understandable—and a number of Bills on the list this year do so—but I wanted not to restrict but to extend freedoms, and this Bill does that. It provides greater protection for existing organisations to carry out their business more effectively and it provides a framework for a flowering and extension of the community benefit societies movement. It will have wider implications beyond our conceptions.

One of the main reasons that I am fond of this Bill—and the reason that I quoted the preamble to the 1852 Bill—is that, sometimes, from tiny little acorns greater oaks may grow. It may well be that making it easier for community benefit societies to operate may have implications for their future kind, range and scale that are wider than we can conceive of now. With those thoughts, I commend the Bill to the House. I very much hope that it will be supported.

Adrian Bailey (Labour/Co-operative, West Bromwich West)

I congratulate my hon. Friend the Member for South Derbyshire (Mr. Todd) on promoting this Bill and on surmounting the twin hurdles of convincing the Treasury and sufficient Members of Parliament to attend for its consideration to allow it to get as far as it has. I hope, of course, that it will reach a successful conclusion.

The hon. Gentleman was being a little too modest when he said that this was "a modest Bill". I wonder whether the pioneers of the co-operative movement in the 1840s realised the full significance of the structure that they had devised with their particular co-operative society and whether they realised the impact that it would have not just on the economy and retail structure of the country, but on its social provision as well. This ostensibly modest proposal could have the most profound consequences. I will deal with those in a moment.

My own long-standing association with the co-operative movement is fairly well known; I mentioned it at Second Reading. The issues that the hon. Gentleman has raised, and that the Treasury has said that it will try to deal with, have been of enormous concern to the movement for a long time. I welcome the amendments, which have been debated at some length today. They strengthen the Bill. I also welcome the Minister's commitment to consider creating a level playing field between company law and industrial and provident society law. From experience of talking to practitioners in the co-operative sector, I know that that is a huge issue for them.

It is gratifying that at last this House is beginning to debate the significance and relevance of co-operative legislation—of which there is now a greater public perception. For too long, debate on our economy and public service provision was carried out in terms of the private sector or the public sector as defined by state or local government provisions. The co-operative and mutual sectors are a huge part of our economy, but that was largely unacknowledged. The hon. Member for Edmonton (Mr. Love) said that, when he contacted local organisations, they did not actually know whether they were an industrial or provident society or company. That reflects the lack of public profile that this form of organisation used to have. However, the situation is changing, partly as a result of private Members' Bills.

Back in the 1980s and early 1990s, demutualisation procedures had a devastating short-term effect on some sections of the mutual movement. However, what happened demonstrated publicly the scale of the assets that those organisations and co-operative societies had. It also forced them to publicise the benefits of this particular form of ownership.

At the same time as people were becoming more aware of the benefits of this form of ownership, the incentive to create new societies was much diminished by the absence of protection for the assets of societies and organisations such as building societies and so on. Possible providers and backers of such societies were deterred by the absence of any long-term protection of those assets. The Bill will provide a mechanism by which that obstacle to future development can be removed, and it has enormous potential.

I wish to look very briefly at some of the areas where the Bill has potential. It offers potential for some charities perhaps to adopt a different form of legal structure to fulfil their objectives more adequately. Water utilities have been discussed in the past, as has the health and social services sector, but I will not stray into the debate on foundation hospitals now.

In particular, sports clubs and football clubs often have huge and deep community interests, but they are wrapped up in clubs that operate in a legal framework that makes them accountable only to relatively small numbers of shareholders, so there is potential for conflict. In some cases, that has led to individuals taking over football clubs and, basically, asset stripping them regardless of the impact on local communities and the long-standing loyalties that huge numbers of people in those communities have to their clubs.

This model of provision offers enormous potential. My hon. Friend the Member for Watford (Claire Ward), who is not in her place at the moment, mentioned football trusts, but the formation of football trusts and the Bill can work together to give added protection to such organisations. That is very much in line with the concerns of people in their local communities and will do a lot to promote the concept of co-operatives and community societies in a way that enhances their attractiveness to a huge section of the community.

I am conscious of the fact that other hon. Members wish to speak, so I will draw my remarks to a conclusion by saying that this so-called modest addition to the range of options available to organise societies and companies may have a profound effect in the future, and we should be extremely grateful to my hon. Friend the Member for South Derbyshire for piloting the Bill through the House of Commons.

Gareth Thomas (Labour, Harrow West)

I am grateful to the House for the opportunity to congratulate my hon. Friend the Member for South Derbyshire (Mr. Todd) on the way in which he has piloted the Bill through its various stages in the House thus far. He has demonstrated an excellent grasp of the subject matter, which has its origins in the 19th century, as we said earlier. He has effectively consulted the organisations that use the industrial and provident society legal form and, perhaps most importantly, he has negotiated the Bill's passage through the House of Commons with great skill. Given the many obstacles that can trip up private Members' Bills, he deserves particular credit for that success.

I welcome the Bill. I particularly welcome clause 1 as a further guarantee against demutualisation. Unlike my hon. Friend the Member for West Bromwich, West (Mr. Bailey), I think that foundation hospitals are an interesting example to touch on briefly in the context of clause 1. By the time that the Bill is passed by the House of Commons and the other place—I hope that that will happen—the House will still be considering the foundation hospitals legislation, which I warmly support. Whether foundation hospitals could use the industrial and provident societies legal form is worthy of debate, perhaps not now, but certainly in considering the legislation that my right hon. Friend the Secretary of State for Health may introduce in due course.

I pay tribute to the way in which Ministers have co-operated with my hon. Friend the Member for South Derbyshire, but I should like to flag up some unfinished business in the reformation and modernisation of the legislation that governs this sector. In Committee, we touched on audit and accounting requirements for industrial and provident societies. The most pressing problem is that societies wishing to publish interim accounts must undertake a full audit, with all the associated costs that accountants charge. Companies, by contrast, can simply publish interim accounts and declare that they are unaudited, which is a major anomaly. The Co-operative Group, perhaps the largest industrial and provident society, estimates that producing half-yearly interim accounts costs it about £0.25 million. The Midlands Co-operative Society, a smaller industrial and provident society, estimates that it costs £60,000 per annum to produce interim accounts, and the Colchester and East Essex Co-operative Society estimates that it costs about £30,000 a year.

It is clearly unreasonable to place more onerous requirements on community businesses that compete with companies that are not under the same requirements. The issue is becoming increasingly urgent, and Ministers need to address it. My hon. Friend the Financial Secretary acknowledged its importance in Committee and in response to my earlier intervention, so I hope that people who work for her will redouble their efforts to provide her with a solution to the problem. Another problem is the exemption from audit requirements for societies with a small turnover. Companies with a turnover of less than £90,000 are exempt from audit, but those with a turnover between £90,000 and £350,000 need an accountant's report. By comparison, since 2000, any companies with a turnover of less than £1 million can gain exemption from the cost of any audit or accountant's report. Again, there is a major anomaly in the audit requirements for smaller societies compared with similar sized companies, which needs to be addressed.

My hon. Friend the Member for Edmonton (Mr. Love) has flagged up the fact that the Companies Directors Disqualification Act 1986 does not apply to industrial and co-operative societies. If we are modernising legislation, we must recognise that industrial and provident societies, just as much as companies, can have rogue directors, and we need to address that issue. Limits on investments were touched on briefly—they, too, need to be addressed as a matter of urgency. Industrial and provident societies are permitted to take some investments from their members, to allow much-needed capital injections into those societies. At present, there is a limit in the legislation of £20,000 maximum per member. That was a sensible limit when it was introduced, and was designed to ensure that no individual shareholder member of a society had undue influence over it, thus reinforcing societies' democratic nature. However, community businesses sometimes have difficulty raising the capital that they need for their investment programmes. Indeed, that was recognised as recently as last week, when the Treasury, the Department of Trade and Industry and the Home Office jointly announced a consultation on the community interest company, another model for community businesses in future, which will be able to attract investment so that it can operate for the benefit of the community, with no £20,000 limit on its investments. Ministers accept the need for a level playing field so that industrial and provident societies are on an equal footing with companies and other mutual organisations, but that limit is another issue that needs to be sorted out as a matter of urgency.

Lastly, I take Ministers back to the issue of the powers of the regulator. Again, the regulator is an important check and safeguard for society members and for those seeking to engage with industrial and provident societies. As we heard on Second Reading and briefly touched on in Committee, the regulator's powers in relation to industrial and provident societies are not as wide as they are for companies. That is an important area where modernisation is needed.

My hon. Friend the Member for South Derbyshire has done the industrial and provident society movement a great service by promoting the Bill, ending for many the scourge of demutualisation and modernising the way in which ultra vires matters and matters relating to the SIB are dealt with. I congratulate him again on the way in which he has piloted his Bill through the House and I wish it a fair wind through the other place.

Tom Levitt (Labour, High Peak)

I was inspired to seek to catch Mr. Deputy Speaker's eye in the debate because of some words that I read in Hansard, which defined mutualism as

"a desire for more control of our lives; recognition that membership and involvement can add quality to service; and acceptance that services for a community can be best managed by that community."—[Official Report, 31 January 2003; Vol. 398, c. 1114.]

Sagacious words from the speech of my hon. Friend the Member for South Derbyshire (Mr. Todd) on Second Reading. Wise words always come from Members of Parliament representing Derbyshire, as we know.

It is an opportune time to consider these issues in relation to the voluntary sector, first, because the Home Secretary has proposed a charities Bill; secondly, it is time to review the compact of understanding that exists between Government and local government on the one hand and the voluntary sector on the other, as regards the delivery of services; and thirdly, because of the strategy unit report, "Private Action, Public Benefit", which has been mentioned by other speakers. The Bill allows for charitable purposes to be achieved by means that would normally be in the province of business. The 10-point definition of charitable purposes suggested in the strategy unit report is a sensible analysis and clarification of the legal position.

At present services are provided by three different sectors. We can visualise them as a triangle. At one corner is business, which uses the market, has a profit orientation and is traditionally owned by the few. At another corner is Government, operating by means of legislation and public spending, and constrained by democratic accountability at local and national level. At the third corner is the voluntary sector, including the co-operatives and mutuals, with a huge variety of types of provision. There are about 600,000 organisations, including 180,000 registered charities, in the voluntary sector, but for reasons of brevity, I shall not list them. In the past those three sectors viewed each other with suspicion.

Now let us consider another triangle, with each of its points between two points of the first triangle, giving us a six-pointed star. We have arm's-length companies in the space between business and Government. An example is the one being used in the housing sector. We have "compact" partnerships between Government and voluntary service, and we have the new concept of charitable companies operating in the section of the model between business and the voluntary sector.

The compact is

"a memorandum of understanding between national and local government and the voluntary sector, defining co-working practices in a way that neither demeans nor exploits the voluntary sector, which has much to offer to the delivery of public service."

I quote from my article in The House Magazine charities supplement last week. I commend the whole article, of course, as well as the article by the Charities Commission, which welcomes the strategy unit report.

The model of the six-pointed star allows charitable companies to have a social purpose, to operate on a not-for-profit basis, to involve people and to have devolved and wider ownership, but at the same time to have business attitudes to delivery, planning, trading, efficiency and financial stability. That is extremely important. On trading in particular, it is necessary to clarify the law and allow voluntary sector organisations and charities to get the benefits as well as the protection that they need in order to trade effectively and to promote their cause in that regard.

The strategy unit report anticipates the development of community interest companies and charitable incorporated organisations, both of which are very much in line with the Bill. By creating the idea of the charitable company and ensuring that there is a continuum, we can ensure that three different sectors no longer compete against each other and vie with each other generally in the provision of services. Instead, there will be a continuum in which one merges into another. By breaking down the isolation between business, government and the voluntary sector, we can only gain from the achievements of such organisations and develop charitable purposes still further.

I believe that those provisions, along with those in my hon. Friend's most excellent Bill, will benefit the whole community for the future.

David Lepper (Labour/Co-operative, Brighton, Pavilion)

I am glad to have this brief opportunity to add my congratulations to my hon. Friend the Member for South Derbyshire (Mr. Todd). The fact that he chose to introduce a Bill relating to co-operatives after having drawn the No. 1 spot in the ballot for private Members' Bills this year is a sign of the strength of the revival of interest in the co-operative and mutuals sector. I pay tribute to him for that and for the way in which he has guided the Bill through a process that can often be strewn with obstacles for a Back-Bench Member of Parliament.

In the co-operative and mutual movement, we often spend a lot of time talking about our history. Indeed, we have talked a bit about that history today, and I shall do so a bit more, if I may. I have already referred to Dr. King and his pioneering efforts back in the 1820s, but it was also in Brighton that Peter Kropotkin was inspired towards the end of the 19th century to write "Mutual Aid", partly as a repost to the popularised Darwinian theories of individualism that were so dominant at the end of the Victorian era. It is perhaps no coincidence that when a group of 30 or so organisations operating on co-operative and mutual principles got together five or six years ago to act more cohesively in the Sussex area, they decided to adopt the name "Mutual Aid" for their organisation, which took the form of an industrial and provident society. I am glad to say that they were supported by the co-operative retail group in their activities.

In the past few years, as my hon. Friend the Member for West Bromwich, West (Mr. Bailey) has said, partly because of attempts to demutualise building societies and attacks by carpetbaggers on the Co-operative Wholesale Society, we have seen the co-operative and mutual movement reviving and galvanising itself. It has done so not only because of the need to protect, but because of the need to look to the future. In the past year, two Bills on such issues have been introduced—those of my hon. Friend the Member for Harrow, West (Mr. Thomas), to whom I pay tribute as president-elect of the Co-operative Congress for the next year, and my hon. Friend the Member for Edinburgh, North and Leith (Mr. Lazarowicz). Both those Bills dealt with aspects of co-operative and mutual organisation.

I am proud of the record of this Labour Government in supporting co-operatives. Mention has already been made of Supporters Direct, which was established with funding from the Department for Culture, Media and Sport, and it was my right hon. Friend the Prime Minister who set up the Co-operative Commission a couple of years ago to consider the future of the co-operative movement. In public service provision and well-known examples such as those in Bristol and Greenwich, we can see how co-operative forms of organisation are making services more responsive to the needs of those who are using them. My hon. Friend the Member for Harrow, West rightly suggested that the principles of community benefit societies might well have a part to play in the organisation of foundation hospitals.

I congratulate my hon. Friend the Member for South Derbyshire on his Bill and I hope that it completes its remaining stages. It is part of the welcome revival of interest in co-operative and mutual principles that I am sure will now go only from strength to strength.

Stephen O'Brien (Conservative, Eddisbury)

May I draw attention to my entry in the Register of Members' Interests? I am a member and fellow of, and a parliamentary advisor to, the Institute of Chartered Secretaries and Administrators. My spouse and I are honorary life members of the Winsford Constitutional and Conservative club, which is encompassed by the Bill's provisions.

I reiterate my congratulations to the hon. Member for South Derbyshire (Mr. Todd) on not only coming first in the private Member's Bill ballot, but on promoting a wholly worthy Bill, which will be effective due to our considerable deliberations during its passage. It will be greatly welcomed by co-operatives and community benefit societies. They play an important role in the voluntary sector, which is supported by hon. Members from all parties as being integral to the way in which we in this country live our lives and as part of the essential culture of a civilised society as defined in a democracy under the rule of law. I have taken pleasure in the way in which we gave the Bill's provisions a good airing on Second Reading on 31 January and in Committee on 18 March, and it would be inappropriate to summarise all those arguments now, not least because there are other Bills to be considered today and we should allow them that chance.

The official Opposition take great pleasure in being fully supportive of the Bill's intent. I was interested to note that the Liberal Democrats indicated their support on Second Reading, although we have heard little from them in this debate. Plaid Cymru also supports the Bill, so it is true to say that it has all-party support. The original Bill as drafted by the hon. Member for South Derbyshire had the great merit of brevity.

Robert Smith (Liberal Democrat, West Aberdeenshire and Kincardine)

The hon. Gentleman might not have heard much from me because, as he said, there are other interesting Bills to consider. Given that Liberal Democrat Members supported the Bill on Second Reading and participated in improving the Bill in Committee and on Report, there can be no doubt that they support the Bill. I should note that we are spending more time on Third Reading of the measure than we do on many Government Bills.

Stephen O'Brien (Conservative, Eddisbury)

I am grateful to the hon. Gentleman for confirming that the Bill has all-party support. We shall see how much time I shall take on Third Reading to decide whether his assertion is correct.

The initiative of the hon. Member for South Derbyshire has allowed the Government to focus their energy on addressing the matter seriously with the professional resources at their disposal. That is why the Bill's measures and detail are correct and why we should speed its passage to join other Acts on the statute book. It is a permissive Bill and will consequently be enabling legislation. Producing such legislation rather than measures that curtail and restrict freedom is the proper role of the House and an essential element of our democracy. I could not say the same of other Bills before the House.

Clauses 1 to 3 of the original Bill were replaced by new clause 1, and new clauses 2 to 5 were added. The original clause 4 is now clause 6 and the original clause 5 is now clause 7. The Bill also now has new clause 8 and clause 9, and so it was important to keep track of it. I can honestly claim to be half-Lancashire and therefore part of the genuine heritage of the co-operative movement, a pride in which I share with many others, and I am glad that this important sector has been recognised, not least because, at the end of 2000, the 8,382 industrial and provident societies on the register held assets of £61 billion in this country. It is an incredibly important sector.

For the purposes of that analysis, the register is divided between retail societies, including the small co-operative stores—one of which is in Bunbury in my constituency, in which I shop every week and get my ample supply of newspapers; one might call it a media store—and the wholesale and productive societies. The register also includes the agricultural societies that are so important to our rural economy, given the challenge that it faces, the fishing societies that provide the ability to supply fishing equipment to members and marketing facilities to each other, clubs—of one of which I am proud to be an honorary member—general service societies and housing societies. Given the great importance of those organisations to what is taking place in so many of our communities, the strategy unit report correctly put its finger on this important area for review, as has been mentioned earlier.

We did not have the opportunity on Report to refer to some of the questions raised in Committee. The Minister very helpfully agreed to write to me about them, and I would like to place on record that she did so on 25 March. Her letter sought to deal with two particular points, and I urge all Members with an interest in the Bill to read it, as it has been placed in the Library. It had attached to it the draft regulatory impact assessment, and I am most grateful to all those who have spent time giving that assessment proper and due consideration.

I am pleased to place on record that it is a very satisfactory and helpful document which summarises why this measure is justified and—if I may rather immodestly suggest this—vindicates the request for such an assessment. It merits reading, and the point that flows from it—to which the Minister might allude later—is that it seeks to clarify why it is fair to say that this provision does not anticipate all the measures that might come out of the strategy unit report on charity law reform. At the same time, however, it heralds some of the thinking that is probably going on as a result of the extensive consultation that is taking place because of that very worthy and welcome report.

In regard to the regulatory impact assessment's finding on the power to restrict the use of assets—the so-called asset lock—in clause 1, the Minister's letter suggests that, without an asset locking regime in place, there would be "a serious deterrent to funders". It is important to recognise that that was not clear from the outset, and that it has become clear during our deliberations. That is part of the merit that has been derived from our having had this extensive debate on the Bill. That was important not only because we have looked at a number of the processes by which these entities are able to commit themselves and to be bound to the outside world as well as ensuring that they have modern procedures, but because, in the modern competitive world, they must have the opportunity to gain the confidence of those who would seek to fund them so that they can be competitive while maintaining the mutuality of interest of their members. Those requirements have been served by the measures that we are introducing. As with normal companies, the provisions allow for the possibility of a reduction in transaction costs and the facilitating of business transactions, which I welcome as potentially deregulatory.

I would like to raise a practical point, which is that, in relation to the sealing of documents, there is an added benefit that is not highlighted in the Minister's letter of 25 March. These days, commercial deals are often done quickly to capture the opportunity, and co-operative or community benefit societies equally need to try to ensure that they do not lose out by being unable to act swiftly when it is in their interests and the interests of their members to do so.

The seal is no longer needed, although it has to be considered in jurisdictions other than England and Wales. It is appropriate that we have that benefit, which is also necessary given that, these days, company executives, as well as those of co-operatives and community benefit societies, have to travel extensively, despite the fact that they are focused within their community. They are often not in the right place to be able to sign against the seal. The point is very practical, but all those who have been involved in commerce realise that such factors can often be a serious deterrent to getting deals done quickly and giving confidence to the counter-party.

We discussed on Report the ramifications of ostensible authority and vires, but it would be best if we received clarification from the Minister, either today or as soon as possible, that the Financial Services Authority is to be considered. The review is coming up at the end of the year and the FSA's remit is set by Parliament, so the Government will have to come back with a recommendation, but it would be helpful to know what they have in mind or whether there is any barrier to working positively on those issues. As a registry function is provided for the sector, it would be useful to have that clarification. The Minister's letter was helpful as far as it went, and I pay tribute to that.

Moving on from the letter, which I recommend that all those with an interest in the Bill read, my only other reservation about the process is that, as a result of the Government amendments, much will be left to secondary legislation. That will obviously depend heavily on a consultation process. That indeed helps, and as part of the asset lock-in and dedicated assets discussion we had not only consultation, but the liberal use of the word "sensitivity". I am glad to think that the question of dedicated assets and asset lock-ins can be dealt with in a sensitive way. I think that that is intended as an attempt to take cognisance of the particular conditions at any given time and the particular transactions that people may have in mind as to each society. That is sensible, so long as the overriding principles, at all times, are purpose and the community of benefit. If we always keep those uppermost in our minds, we will be fine.

The Bill is highly worthy, likely to be effective and desirable. The point on the question of the name has been considered, but it would be helpful if the Government reiterated their assurance that the legislation is intended not as a blank cheque, but as a process by which secondary legislation is clearly itemised and dealt with under the affirmative resolution procedure, although that has already been confirmed.

It is interesting to note that the hon. Member for Harrow, West (Mr. Thomas), who has kindly sent me a note of apology to say that he cannot be here for the winding-up speeches as he has to go to his constituency surgery, none the less thinks that we are setting a good precedent for foundation hospitals. It will be most interesting to see how that develops, if he believes that the proposals on foundation hospitals relate to co-operatives, which is not how I read them.

My only other point is technical: it would be helpful if the Minister made some reference to when the Government intend to consider the separate legislation that will apply to Northern Ireland and bring it into line. Quite rightly, Northern Ireland has been excluded from the Bill. It has different arrangements, so it would be sensible to consider whether they can be dealt with as effectively as those we have debated today.

It is appropriate to pay tribute not only to the hon. Member for South Derbyshire, as the Bill's promoter, but to the Minister, who has handled proceedings with dedication and a seriousness of intent, and to my constituents who have helped me as they are somewhat involved in the Co-op group, not least the chief executive. The Opposition also pay tribute to all that the co-operatives and community benefit societies do. This is a well-deserved measure that will assist them in going forward in the 21st century. We hope that it builds on the legacy of past generations, which made available assets as well as their time, skills, endeavour and good will. We hope to acknowledge them by doing the same and adding to their good work.

Ruth Kelly (Labour, Bolton West)

I thank my hon. Friend the Member for South Derbyshire (Mr. Todd) for introducing this important Bill on co-operatives and community benefit societies. He has worked hard to secure the Bill's passage through the House. I applaud his constructive approach to bringing that about. The Bill has been improved through scrutiny, which is due in no small part to the illuminating and constructive debate involving hon. Members on both sides of the House. I am sure that that will produce a legislative outcome that will greatly benefit the industrial and provident society sector. I thank the House and my hon. Friend for that. I am also grateful for the support that the Opposition parties have lent to the Bill, and for the favourable remarks made by the hon. Member for Eddisbury (Mr. O'Brien).

Industrial and provident societies, with their ethos of member engagement, independence and help for the community, have for many years made an important contribution to the United Kingdom's economy and society. They form a significant section of the economy. The hon. Member for Eddisbury described the diversity of the sector and the contribution that it makes. Societies also perform an important social function. The Government welcome the benefits that they produce for their members and for the wider community. A range of enterprises across all sectors of the economy can use that flexible corporate form, which, strengthened by the proposals in the Bill, should continue to prosper. We are keen to help the sector to maximise the benefits that it provides to its members, which is why we have made it clear from the outset that we support the principles behind the Bill.

Clause 1 on asset lock-in was rightly given a great deal of attention in Committee. It will enable the Treasury to introduce in secondary legislation provisions under which community benefit societies could prevent any use of, or dealing with, their assets except for the benefit of the community. That will provide societies with the option of ensuring that their assets can be used only for purposes that are beneficial to the community.

As the hon. Member for Eddisbury said, the proposal emerged as one of the key recommendations of the strategy unit's report into the voluntary and not-for-profit sector. The report highlighted the benefits of the proposal, stating that the current situation with no asset lock-in provision was a "serious deterrent to funders". That is an important point. The new provision could be of great benefit to industrial and provident societies.

The report also noted that care would need to be taken for

"robust mechanisms . . . to be put in place to ensure that takeovers, mergers and dissolutions are conducted in a fair and transparent way".

Similarly, it will be important to ensure that societies with the lock can continue to evolve and change their purposes and activities accordingly.

An asset lock-in regime is a complicated area of policy, and it is important that we get it right. My hon. Friend the Member for South Derbyshire and I took the view that it would not be possible, within the time scale envisaged in Parliament, to establish in detail exactly what the regime should look like. We need to produce a regime that will maximise the benefits to societies and the wider economy, which is why the Bill provides for a clause that enables regulations to be made at a later date giving community benefit societies the ability to lock in their assets. As the hon. Member for Eddisbury said, we will consult thoroughly with the movement and with other interested parties to ensure that we get the regulations right. They will be passed by affirmative resolution in due course.

The question of who the regulator will be is one of the details that we have not had time to consider properly during our scrutiny of the Bill. That is why we are introducing enabling legislation, which will allow us to consult more fully with the movement, and with the Financial Services Authority on whether it would be prepared to take on that role. At present, we have no set view on the outcome of that consultation, but I can assure the House that if the Bill is enacted, officials will start work straight away to establish an asset lock-in regime, and will consult on the details of the regime as soon as it is sensible to do so. I can, however, confirm our full support for the principle and the clause.

The hon. Gentleman asked about the current legislation being considered by Northern Ireland Ministers and officials. We are liaising closely with Northern Ireland officials to ensure consistency of approach, but, while consistency is highly desirable and will certainly be taken into account, this is ultimately a matter for Northern Ireland.

I shall not repeat all the arguments advanced in Committee, but I will say a little about the Bill. Clauses 2 and 3 update industrial and provident society legislation in line with company law to make it easier for societies to enter into business transactions. They protect those dealing with societies and society committees from adverse consequences if societies or committees are found to have acted outside societies' rules. That will remove the current risk that apparently legitimate business transactions may prove invalid if a society is found to have acted outside its own rules. It will also remove the onus on those doing business with societies to investigate their rules before entering into contracts.

The clauses were amended in Committee to make their effects more transparent. By setting out all the new provisions as amendments to the 1965 Act, they reduce the amount of reference to other Acts that would otherwise be necessary, and make clear the intended effects on societies. The proposals accord with the Government's agenda for modernisation of the industrial and provident society form, and with our aim to create, where appropriate, a level playing field between societies and the company corporate form.

The aim of clauses 4 and 5 is to make it easier for societies to enter into contracts and execute documents. It seeks to do that by, again, bringing industrial and provident society legislation up to date with existing provisions of company law. The hon. Member for Eddisbury raised some important points about that. Societies will be more able to execute documents without having to overcome the potentially cumbersome burdens associated with having to use a common seal on all occasions, and will thus enjoy much more flexibility.

The Bill takes an important step towards the modernisation of industrial and provident society legislation. In doing so, it will benefit societies and their members, and I am pleased to say that it has the Government's full support. Mutual societies have an important part to play in providing consumers with choice and innovative services in retail and financial markets, and in facilitating social enterprise. I believe that the Bill has the potential to add significantly to the contribution already made by industrial and provident societies.

I congratulate my hon. Friend the Member for South Derbyshire on his work, and on the constructive way in which he has engaged with the Department and with me throughout the Bill's passage. I also thank all who have spoken today, and who spoke during the Bill's earlier stages. The Bill makes an important contribution to the industrial and provident society movement, and will benefit that movement considerably. It will modernise the sector, and I wish it every success in the other place.

Mark Todd (Labour, South Derbyshire)

With the leave of the House, Mr. Deputy Speaker.

I thank all who have spoken today and, indeed, those who spoke during the Bill's earlier stages. Some have done both. I also thank the co-operative movement in general, particularly Peter Hunt and Matt Ball, who have worked tirelessly in providing information and support. I thank, in particular, the hon. Member for Eddisbury (Mr. O'Brien) for his consistently informed and constructive contributions, and for the time he has devoted to the Bill. I also thank the Treasury team, which has worked extremely well with me and my advisers, particularly the Minister, who has responded with great grace and care. I extend my best wishes to her in her future career both as a Minister and as a mother.

Question put and agreed to.

Bill accordingly read the Third time, and passed.